-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UhwTaJtlyz6z1T+XKokBXFIbZAJ6pzih+wuQ91lnXLPVbWs/FIogoN0JNBPFQqk6 w+KG0pSOByyqqBzEq4hUmg== 0000950134-05-022721.txt : 20060929 0000950134-05-022721.hdr.sgml : 20060929 20051207060103 ACCESSION NUMBER: 0000950134-05-022721 CONFORMED SUBMISSION TYPE: CORRESP PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20051207 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANDREW CORP CENTRAL INDEX KEY: 0000317093 STANDARD INDUSTRIAL CLASSIFICATION: DRAWING AND INSULATING NONFERROUS WIRE [3357] IRS NUMBER: 362092797 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: CORRESP BUSINESS ADDRESS: STREET 1: 3 WESTBROOK CORPORATE CENTER, SUITE 900 CITY: WESTCHESTER STATE: IL ZIP: 60154 BUSINESS PHONE: (708) 236-6600 MAIL ADDRESS: STREET 1: 3 WESTBROOK CORPORATE CENTER, SUITE 900 CITY: WESTCHESTER STATE: IL ZIP: 60154 CORRESP 1 filename1.htm corresp
 

December 6, 2005
Ms. Nili Shah
Accounting Branch Chief
Division of Corporation Finance
100 F Street, NE
U.S. Securities and Exchange Commission
Washington, D.C. 20549-0510
     
RE:
  Andrew Corporation
Form 10-K for the fiscal year ended September 30, 2004
Filed December 13, 2004
Forms 10-Q for the Fiscal Quarters Ended December 31,
2004, March 31, 2005 and June 30, 2005
File No. 0-21682
Dear Ms. Shah:
This letter is in response to questions the Staff raised on the Tuesday, November 29 conference call. This letter also contains additional information that came to the company’s attention as a result of preparing this letter, as discussed with you on Monday, November 28. This information was inadvertently excluded from prior responses to the Staff and relates to the amount of deferred revenue on Allen Telecom’s financial statements and the classification of that deferred revenue as “accounts receivable” on their balance sheet.
Additionally, our response dated October 3, 2005 (comment #9) indicated that the customer did not allow billing to occur until certification services were completed. The company has since learned that this statement was not accurate in that the customer had been billed for PSAP integration work that had been performed prior to Addendum No. 5.
Prior response letters regarding this matter were compiled from contracts, business activity and accounting information provided by division management responsible for the geolocation business. The company believes that these inaccuracies occurred due to division management not fully understanding the accounting questions and not having enough historical knowledge of the geolocation business and accounting activities.
It is always the company’s objective to provide complete, relevant and accurate responses to the Staff’s comments. The company regrets that the October 3, 2005 response letter contained these inadvertent inaccuracies.

 

 

Comment #1
Describe how Allen Telecom accounted for deferred revenue and what was included on their July 14, 2003 (pre-acquisition) balance sheet.
Response:
As PSAP integration services were completed and invoiced, Allen Telecom debited accounts receivable and credited deferred revenue, which was presented net of trade receivables on their balance sheet. Costs incurred in providing these services were carried as inventory. Revenue was recognized only upon completion of the related certification services.
Allen Telecom’s final, pre-acquisition balance sheet included deferred revenue of $8.7 million related to PSAP integration work and $0.6 million of deferred revenue (presented as such on the balance sheet) related to extended maintenance agreements (as noted in comment #8 of the company’s October 3, 2005 letter). Additionally, Allen Telecom’s pre-acquisition balance sheet included $2.9 million of inventory related to deferred PSAP integration costs.
Comment #2
Describe Andrew Corporation’s purchase accounting treatment of Allen Telecom’s deferred revenue.
Response:
In Andrew Corporation’s purchase price allocation, $8.7 million was included in the opening balance sheet as deferred revenue consistent with Allen Telecom’s classification. Of this $8.7 million, $3.5 million was recognized from July 2003 to the quarter ended September 2004 as certification work was completed. As previously indicated in the company’s June 30, 2005 response letter, the remaining $5.2 million was recognized as part of the $9.6 million that was recorded subsequent to the execution of Addendum No. 5.
Andrew Corporation’s purchase price allocation also included the $2.9 million of inventory related to PSAP integration costs. This inventory balance represented costs deferred with respect to the $8.7 million deferred revenue balance.
Comment #3
Describe Andrew Corporation’s proposed restatement of revenue and income for the geolocation contracts acquired from Allen Telecom.
The SAB 99 analysis below documents proposed restatements for the impact of:
  •   the adoption of SOP 97-2

 

 

  •   PSAP integration revenue recognition based on the completion of PSAP integration services, and
 
  •   intangible asset amortization expense based on a lower value of identified intangible assets acquired from Allen Telecom.
Andrew Corporation — Geolocation Revenue Recognition Changes
 
(dollars in thousands)
                                                                                               
ADOPTION OF SOP 97.2
  
 
                                                                            
 
     Q4     FY03   Q1     Q2       Q3       Q4     FY04     Q1       Q2       Q3       Q4     FY05
 
                                                                  
REVENUE
     (1,630 )   (1,630 ) 100     (62 )     (12 )     651       677       962       (220 )                     742  
PRE-TAX
     (1,588 )   (1,588 ) 107     (73 )     (16 )     651       669       1,212       (287 )                     925  
NET INCOME
     (985 )   (985 ) 66     (45 )     (10 )     404       415       752       (178 )                     574  
 
                                                                                        
PSAP INTEGRATION — Opening Balance Sheet Adjustment
  
 
                                                                        
 
     Q4     FY03   Q1     Q2       Q3       Q4     FY04     Q1       Q2       Q3       Q4     FY05
 
                                                                  
REVENUE
     (38 )   (38 ) 267     792       (33 )     (9,565 )     (8,539 )     (1,199 )     139       3       924       (133 )
PRE-TAX
     (218 )   (218 ) 60     402       (1,211 )     (4,776 )     (5,525 )     (659 )     76       2       508       (73 )
NET INCOME
     (135 )   (135 ) 37     248       (748 )     (2,949 )     (3,412 )     (407 )     47       1       314       (45 )
 
                                                                                        
PSAP INTEGRATION — Amortization Impact
  
 
                                                                            
 
     Q4     FY03   Q1     Q2       Q3       Q4     FY04     Q1       Q2       Q3       Q4     FY05
 
                                                                  
REVENUE
     —     —   —     —       —       —       —       —       —       —       —       —  
PRE-TAX
     190     190   190     190       190       190       760       190       30       30       30       280  
NET INCOME
     117     117   117     117       117       117       469       117       19       19       19       173  
 
                                                                                        
TOTAL of CHANGES
                                                                                        
 
     Q4     FY03   Q1     Q2       Q3       Q4     FY04     Q1       Q2       Q3       Q4     FY05
 
                                                                  
REVENUE
     (1,668 )   (1,668 ) 367     730       (45 )     (8,914 )     (7,862 )     (237 )     (81 )     3       924       609  
PRE-TAX
     (1,616 )   (1,616 ) 357     519       (1,037 )     (3,935 )     (4,096 )     743       (181 )     32       538       1,132  
NET INCOME
     (1,002 )   (1,002 ) 220     321       (640 )     (2,428 )     (2,527 )     462       (113 )     20       332       702  
 
                                                                                        
AS REPORTED
                                                                                        
 
     Q4     FY03   Q1     Q2       Q3       Q4     FY04     Q1       Q2       Q3       Q4     FY05
 
                                                                  
REVENUE
     344,921     1,014,486   410,771     447,146       492,998       487,834       1,838,749       474,074       481,828       487,232       517,491       1,960,625  
PRE-TAX (1)
     8,186     23,326   6,339     15,894       27,413       (723 )     48,923       19,411       5,284       20,971       16,381       62,047  
NET INCOME
     (1,204 )   9,061   3,805     10,212       19,199       569       32,278       14,625       3,124       12,969       7,206       37,924  
EPS
   $ (0.01 ) $ 0.08 $ 0.02   $ 0.06     $ 0.11     $ 0.00     $ 0.20     $ 0.09     $ 0.02     $ 0.08     $ 0.04     $ 0.23  
 
                                                                                        
RESTATED
                                                                                        
 
     Q4     FY03   Q1     Q2       Q3       Q4     FY04     Q1       Q2       Q3       Q4     FY05
 
                                                                  
REVENUE
     343,253     1,012,818   411,138     447,876       492,953       478,920       1,830,887       473,837       481,747       487,235       518,415       1,961,234  
PRE-TAX
     6,570     21,710   6,696     16,413       26,376       (4,658 )     44,827       20,154       5,103       21,003       16,919       63,179  
NET INCOME
     (2,206 )   8,059   4,025     10,533       18,559       (1,859 )     29,751       15,087       3,011       12,989       7,538       38,626  
EPS
   $ (0.02 ) $ 0.07 $ 0.03   $ 0.07     $ 0.10     $ (0.01 )   $ 0.19     $ 0.09     $ 0.02     $ 0.08     $ 0.05     $ 0.24  
 
                                                                                        
EPS INCREASE (DECREASE)
   $ (0.01 ) $ (0.01) $ 0.01   $ 0.01     $ (0.01 )   $ (0.01 )   $ (0.01 )   $ 0.00     $ (0.00 )   $ 0.00     $ 0.01     $ 0.01  
  1.   This analysis only includes geolocation contract revenue recognition restatements, as such, Q1
and Q2, 2005 pre-tax amounts have intentionally not been restated for the $19.8 million warranty charge.
The SOP 97-2 restatement documents the change to the company’s financial statements based on adoption at the inception of the AT&T Wireless contract. In summary, $1.6 million of revenue for fiscal 2003 is decreased and deferred to later years—primarily fiscal years 2004 and 2005.
The PSAP integration revenue restatement has an overall impact as follows:
  •   the opening balance sheet deferred revenue amount of $8.7 million was eliminated with the offsetting adjustment to the goodwill account
 
  •   the opening inventory amount of $2.9 million was eliminated with the offsetting adjustment to the goodwill account
 
  •   revenue for the three fiscal years 2003, 2004 and 2005 was reduced, in the aggregate, $8.7 million
 
  •   revenue recognized for PSAP integration services completed subsequent to the July 2003 acquisition was restated to the period in which the work was performed
 
  •   cost of sales amounts were revised so the restated costs match restated revenues on a quarterly basis; overall, cost of sales decreased $2.9 million for the three fiscal years 2003, 2004, 2005 in the aggregate

 

  •   the valuation of certain intangible assets acquired from Allen Telecom (AWS supply agreement and patents) was impacted by the elimination of the $8.7 million of deferred revenue on the opening balance sheet. The value ascribed to these assets would be $1.4 million less than originally reported, and intangible amortization expense was therefore reduced during the 2003-2005 period.
The restatements presented on the SAB 99 analysis are the result of the company’s analysis of the geolocation accounting for the periods presented. Andrew Corporation’s external auditors have analyzed the company’s restatement work and concur with the restatements presented herein. Additionally, the company engaged a valuation firm to review the impact of the revenue restatement on the fair value of acquired intangible assets.
I have asked Mark Olson to contact you tomorrow to ensure that we have fully addressed each of the Staff’s comments. If there are further questions, please contact the undersigned at (708)873-3300.
Very truly yours,
/s/Marty R. Kittrell
Marty R. Kittrell
Chief Financial Officer
     
Cc:
  Ms. Tracey Houser (Securities and Exchange Commission)
 
  Mr. Nathan Cheney (Securities and Exchange Commission)
 
  Mr. James P. Sherman (Ernst & Young LLP)
 
  Mr. Dewey B. Crawford (Foley & Lardner LLP)

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